The Hydroponics Company (THC) is the latest company to capitalise on the legalisation of medicinal cannabis in Australia, known as the ‘pot stock’ boom, and will begin trading on the ASX next month.
THC, headquartered in Sydney, aims to raise $5 to $8 million at 20 cents a share (the initial public offering being 25 to 40 million shares) to expand and diversify as a manufacturer and distributor of medicinal cannabis.
It joins AusCann, which started trading last month, Zelda Therapeutics, Perth company MGC Pharma, Creso Pharma and International Cannabis Corp, all of which have recently listed on the ASX.
The floodgates opened after it became legal to cultivate, produce and manufacture medicinal cannabis products in Australia on October 30 last year.
The ruling signalled the birth of a potentially highly profitable new industry in Australia, which thousands of chronically ill people and their families have been asking for for many years.
Medicinal cannabis can be used to treat severe pain, nausea and vomiting and to ease muscle spasticity. It can stimulate appetite as well as lift moods. It can provide relief for patients including those with cancer, epilepsy, HIV and MS.
A 2016 University of Sydney report, Medicinal Cannabis in Australia: Science, Regulation & Industry, found that the Australian medicinal cannabis market, once opened up, could spark initial demand for as much as 8,000kg of product, creating an industry worth more than $100 million a year.
The new industry will be regulated by the Office of Drug Control and the Therapeutic Goods Administration with individual states and territories having their own rules about who can prescribe it and which patients can access it.
The company says the cash from the Initial Public Offering will be used to increase its market share in hydroponic equipment and large-scale greenhouses and plant nutrients, alongside funding the development and delivery of medicinal cannabis in Australia.
THC’s medical cannabis division, Canndeo Limited, breeds and grows Cannabis sativa. According to THC, Canndeo has more Australian plant breeders’ rights than any other company and has 17 years of experience.
Canndeo has applied for a Medicinal Cannabis Research Application to grow cannabis in Australia and THC says a decision is expected in the coming weeks.
CEO of Canndeo, Dr Andrew Beehag, said the company was building its international alliances to take advantage of the new legislation and accelerate production in Australian.
“We are also very excited by the possibilities for patients here in Australia afflicted by dementia, neurological [problems], chronic pain, epilepsy and other debilitating conditions that may benefit from medicinal cannabis.”
It is not just the domestic market that Australian medicinal cannabis companies can tap. Cannabis is allowed for medical use in countries including 36 US states, France, Canada, Germany, the Netherlands, Uruguay, Chile, the Czech Republic and Israel.
The global market is burgeoning. THC’s prospectus says the North American medicinal cannabis industry is experiencing 30 to 40 per cent annual growth “driven by the trend to legalise cannabis for both medicinal and recreational use” with a projected impact of between $24.4 billion and $US44 billion for 2020.
THC’s CEO Hamish MacDonald said the company anticipated “aggressive growth” over the next one to two years, with revenue growing from more than $5 million in 2017 to more than $15 million by 2018.
But the industry in Australia is not without risk. Medicinal cannabis must be listed on the Australian Register of Therapeutic Goods, prior to approval by the Therapeutic Goods Administration.
Clinical trial data must be collected and companies must go through a lengthy, costly approval process where gaining approval for each new chemical entity can cost $250,000. Cannabis is a mixture of chemical compounds, which makes it more expensive and complex to get approved.
Last year, Government News spoke to Elaine Darby, Managing Director of Auscann, which hopes to grow and manufacture medicinal cannabis in Western Australia, about the hurdles companies in the industry face.
“The key limitation is to have expertise to grow and produce standardised medicine so that every batch is the same. There’s lots of expertise required to do that,” Ms Darby said.
“Manufacturers need to have clear runs of sight to the end user. They have to set up this supply chain … and identify patient groups.”
Growers need to be able to have a manufacturer to sell to, or to grow and manufacture the product – which is not smoked but usually liquid or capsules – themselves.
Ms Darby said: “Realistically it would limit the number of players at the start.”
But despite the convoluted process, the states and territories are getting on board.
The first set of trials began last year with the focus on treating children with severe, drug-resistant epilepsy. The second and third sets of trials will target controlling chronic pain and chemotherapy-induced nausea and vomiting for patients with terminal illnesses.
NSW police have been asked to exercise discretion and not to charge registered adults with possession of marijuana.
In Queensland certain specialists, including oncologists, paediatric neurologists and palliative care specialists, have been able to can prescribe medicinal cannabis since March 1, 2017.
Other doctors will be able to apply to Queensland Health for permission to prescribe the drug on certain conditions.
Victoria has also legislated to allow medicinal cannabis to be legalised, with childhood epilepsy the first target for the trials. Tasmania, Western Australia, and other states are also passing legislation supporting the Federal government’s legislation to allow for limited medicinal cannabis use.
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